East Acupuncture, P.C. v. Allstate Ins. Co.
(2nd Dept., decided 2/17/2009)
Subdivisions (a) and (c) of 11 NYCRR § 65-3.9, Interest on overdue payments, provide:
At issue in this case, as in many lower court cases before it, was whether the term "applicant" as used in subdivision (c) of this interest tolling regulation applies only to eligible injured persons or to their medical provider assignees, as well. Resolving conflicting decisions in New York trial courts, and AFFIRMING the Appellate Term's 2007 decision, Second Department ruled that the term "applicant," as used in 11 NYCRR 65-3.9(c), refers to both provider/assignees and injured persons and that the toll on statutory interest provided for therein applies to no-fault claims submitted to insurers by both types of claimants.(a) All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, calculated on a pro rata basis using a 30-day month. When payment is made on an overdue claim, any interest calculated to be due in an amount exceeding $5 shall be paid to the applicant or the applicant’s assignee without demand therefor.
(c) If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken. If any applicant is a member of a class in a class action brought for payment of benefits, but is not a named party, interest shall not accumulate on the disputed claim or element of claim until a class which includes such applicant is certified by court order, or such benefits are authorized in that action by Appellate Court decision, whichever is earlier.
In agreeing with the Appellate Term's decision, the Second Department held:
(1) the Insurance Superintendent's interpretation of the term "applicant" in 11 NYCRR 65-3.9(c) as referring to both provider/assignees and injured persons is neither irrational nor unreasonable and, as such, is entitled to deference;(2) the Superintendent's interpretation conforms with the general principle that an assignee stands in the shoes of an assignor and thus acquires no greater rights than those of its assignor; and(3) East Acupuncture's reliance upon LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co. (46 AD3d 1290, 1291-1292, lv granted 10 NY3d 717) and New York & Presbyt. Hosp. v Allstate Ins. Co. (30 AD3d at 494) was misplaced because the Third Department in those cases did not address the precise issue presented by this appeal: whether the term "applicant," as used in 11 NYCRR 65-3.9(c), refers to both injured persons and provider/assignees.
The Second Department reasoned and concluded:
Medical providers likely will continue to argue that this ruling is at odds with the Third Department's holding in LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co. Suits within the Second Department will, however, be subject to this ruling. It remains to be seen whether East Acupuncture will seek leave to appeal this decision to the Court of Appeals or simply wait to see what that court does with the interest issue when deciding State Farm's appeal in LMK. With much if not most of New York's no-fault litigation occurring within the Second Department, medical providers may want the Court of Appeals to address this issue. If the Court of Appeals does little or nothing with the tolling issue in LMK, there may be more of a possible upside than downside at that point in appealing, if permitted.Applying these principles to the matter at bar, we find that the term "applicant" as used in 11 NYCRR 65-3.9(c) refers to both provider/assignees and injured persons. Since the Superintendent's parallel interpretation is neither irrational nor unreasonable, it is entitled to deference (see Matter of 427 W. 51st St. Owners Corp. v Division of Hous. & Community Renewal, 3 NY3d at 342; Matter of Visiting Nurse Serv. of N.Y. Home Care v New York State Dept. of Health, 5 NY3d at 506). In light of the fact that the no-fault regulations do not provide a general definition of the term "applicant," the plain meaning of this term in 11 NYCRR 65-3.9(c) would seem to refer to any entity, whether an injured person or a provider/assignee, who submits a claim or applies to an insurance company for no-fault benefits (see Majewski, 91 NY2d at 583). Indeed, in some instances, these regulations use the term "applicant" as a generic reference to both provider/assignees and injured persons (see e.g. 11 NYCRR 65-3.2[b], 65-3.3[a], 65-4.2[b][1][I]); while, in other instances, the term "applicant" is used to refer specifically to injured persons (see e.g. 11 NYCRR 65-3.5[e], 65-3.8[g]). However, construing the no-fault regulations as a whole and considering their various sections in reference to each other, as we must (see People v Mobil Oil Corp., 48 NY2d at 199), the Superintendent's interpretation of the term "applicant," as used in 11 NYCRR 65-3.9(c), as a generic reference to both provider/assignees and injured persons is entitled to deference not only because the no-fault regulations do not use this term consistently and exclusively as a reference to injured persons, but because the Superintendent's definition is consistent with the manner in which it is used in certain other instances.The Superintendent's interpretation of 11 NYCRR 65-3.9(c) is additionally consistent with the spirit and purpose of the No-Fault Law (see generally Matter of ATM One v Landaverde, 2 NY3d at 477). One of the primary aims of the no-fault system is to ensure prompt payment of claims (see Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d at 860; Cardinell v Allstate Ins. Co., 302 AD2d at 774). The interest which accrues on overdue no-fault benefits at a rate of two percent per month (see Insurance Law § 5106[a]; 11 NYCRR 65-3.9[a]) is a statutory penalty designed to encourage prompt adjustments of claims and inflict a punitive economic sanction on those insurers who do not comply (see Dermatossian v New York City Tr. Auth., 67 NY2d 219, 224; Cardinell v Allstate Ins. Co., 302 AD2d at 774). Interpreting 11 NYCRR 65-3.9(c) as applying the interest toll only to injured persons would allow a provider/assignee, who delays commencing legal action or requesting arbitration on denied claims, to continue to accrue interest pursuant to Insurance Law § 5106(a) throughout this period of delay. Rewarding such delay with what amounts to essentially a windfall of punitive interest payments is at odds with the legislative goal of promptly resolving no-fault claims.* * * * *In conclusion, we hold that the term "applicant," as used in 11 NYCRR 65-3.9(c), refers to both provider/assignees and injured persons and that the toll on statutory interest provided for therein applies to no-fault claims submitted to insurers by both types of claimants. Accordingly, the Appellate Term properly determined that interest pursuant to Insurance Law § 5106(a) did not begin to accrue on the claims that were untimely denied by Allstate until East Acupuncture filed its complaint. Thus, the Appellate Term properly reversed the order of the Civil Court and remitted the matter for the new interest calculation.
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